John Menadue

PAUL KRUGMAN. Debacle in Quebec. (New York Times, June 9,2018)

_For all their pomp, most multilateral summit meetings are boring and of little consequence. I once spoke to a State Department official who had a role in putting these meetings together; he described his job as policing the nuances, which gives you an idea about how much is normally at stake.

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Occasionally, however, such meetings do have real consequences, good or bad. The 2009 G20 summit, at which nations agreed to provide economic stimulus and loans to troubled countries in the face of the financial crisis, played at least some role in helping the world avoid a full replay of the 1930s. The 2010 summit, by contrast, effectively endorsed a turn to austerity that significantly delayed recovery and, arguably, partially set the stage for the rise of political extremism.

Still, there has never been a disaster like the G7 meeting that just took place. It could herald the beginning of a trade war, maybe even the collapse of the Western alliance. At the very least it will damage Americas reputation as a reliable ally for decades to come; even if Trump eventually departs the scene in disgrace, the fact that someone like him could come to power in the first place will always be in the back of everyones mind.

What went down in Quebec? Im already seeing headlines to the effect that Trump took a belligerent America first position, demanding big concessions from our allies, which would have been bad. But the reality was much worse.

He didnt put America first; Russia first would be a better description. And he didnt demand drastic policy changes from our allies; he demanded that they stop doing bad things they arent doing. This wasnt a tough stance on behalf of American interests, it was a declaration of ignorance and policy insanity.

Trump started with a call for readmitting Russia to the group, which makes no sense at all. The truth is that Russia, whose GDP is about the same size as Spains and quite a bit smaller than Brazils, was always a ringer in what was meant to be a group of major economies. It was brought in for strategic reasons, and kicked out when it invaded Ukraine. There is no possible justification for bringing it back, other than whatever hold Putin has on Trump personally.

Then Trump demanded that the other G7 members remove their ridiculous and unacceptable tariffs on U.S. goods which would be hard for them to do, because their actual tariff rates are very low. The European Union, for example, levies an average tariff of only three percent on US goods. Who says so? The U.S. governments own guide to exporters.

True, there are some particular sectors where each country imposes special barriers to trade. Yes, Canada imposes high tariffs on certain dairy products. But its hard to make the case that these special cases are any worse than, say, the 25 percent tariff the U.S. still imposes on light trucks. The overall picture is that all of the G7 members have very open markets.

So what on earth was Trump even talking about? His trade advisers have repeatedly claimed that value-added taxes, which play an important role in many countries, are a form of unfair trade protection. But this is sheer ignorance: VATs dont convey any competitive advantage theyre just a way of implementing a sales tax which is why theyre legal under the WTO. And the rest of the world isnt going to change its whole fiscal system because the U.S. president chooses to listen to advisers who dont understand anything.

Actually, though, Trump might not even have been thinking about VATs. He may just have been ranting. After all, he goes on and on about other vast evils that dont exist, like a huge wave of violent crime committed by illegal immigrants (who then voted in the millions for Hillary Clinton.)

Was there any strategy behind Trumps behavior? Well, it was pretty much exactly what he would have done if he really is Putins puppet: yelling at friendly nations about sins they arent committing wont bring back American jobs, but its exactly what someone who does want to break up the Western alliance would like to see.

Alternatively, maybe he was just acting out because he couldnt stand having to spend hours with powerful people who will neither flatter him nor bribe him by throwing money at his family businesses people who, in fact, didnt try very hard to hide the contempt they feel for the man leading what is still, for the moment, a great power.

Whatever really happened, this was an utter, humiliating debacle. And we all know how Trump responds to humiliation. You really have to wonder what comes next. One things for sure: it wont be good.

John Menadue

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